Why Climate Change Vulnerability Is Bad for Sovereign Credit Ratings

2021-02-18T14:07:57-05:00February 17, 2021|

By Serhan Cevik and João Tovar Jalles

عربي中文, Español, Français, 日本語, Português, Русский 

Climate change has made the world a riskier place.

The destruction wrought by heatwaves, droughts, hurricanes, and coastal flooding doesn’t stop with the toll on human lives and livelihoods—it can also have deep consequences for a country’s finances. (more…)

Data PointsDenmark’s Ambitious Green Vision

2021-01-11T10:05:41-05:00January 11, 2021|

By Nicoletta Batini and Miguel Segoviano

Denmark aspires to become one of the most climate-friendly countries in the world. In June, its Parliament overwhelmingly passed a new climate law that aims to reduce greenhouse gas emissions by 70 percent below 1990 levels by 2030, with net zero emissions targeted for 2050.

This is an even more ambitious goal than the EU’s target to cut emissions by 55 percent over the same time period.

70%

Amount by which Denmark plans to reduce greenhouse gas emissions by 2030 relative to 1990 levels

 

A new IMF staff paper takes a closer look at Denmark’s green strategy and proposes a few adjustments to help the country realize its ambitious goals. In line with earlier IMF recommendations, the paper proposes a comprehensive strategy with enhanced carbon pricing, reinforced by fiscal incentives across different sectors. It also urges using revenues from carbon pricing to cut labor taxes.

The package proposed in the paper would provide powerful incentives for climate mitigation, while shielding households and firms from higher energy prices. Crucially, the paper argues, spreading measures to different sectors is a good way to avoid carbon prices that are too high, capping them at half the level currently suggested by the Danish Council for Climate Change. The economic cost from this lower carbon price would be fairly low—estimated at about 0.2 percent of GDP.

“Feebates”—fees on products with high emissions combined with rebates on products with low emissions—are recommended for sectors with high emissions. They could be especially useful to curb Denmark’s large agricultural emissions from the country’s huge number of farmed animals. Because feebates raise the costs of producers who farm unsustainably but reward them as they shift to sustainable farming, this program can deliver a fair low-carbon transition that preserves profitability and jobs.

By crafting an effective climate policy that protects the majority of people, Denmark’s strategy to make large cuts in its emissions could be more attainable.

Demographics and Destiny

2020-03-02T17:22:06-05:00March 2, 2020|

By Gita Bhatt

When I visit my home country, India, I am always struck by how young it looks. From the big cities to the tiny villages, one can see the hopes and aspirations of twenty-somethings, many in search of work. In Japan, demographic trends have been moving in the opposite direction. Homes sit vacant, and villages are vanishing, as people have fewer children. In response, the Japanese are embracing technology to fill the gaps through innovations like robot chefs and automated medical services. (more…)

Assessing Climate-Change Risk by Stress Testing for Financial Resilience

2020-02-06T09:59:37-05:00February 5, 2020|

By Tobias Adrian, James Morsink, and Liliana Schumacher

عربي, 中文, Español, Français, 日本語Português, Русский

As society braces for the potential havoc a changing climate could induce, it’s vital to gauge the range of shocks that the economy may soon endure. One way to quantify the effects of the potentially systemic shocks that could ripple through the financial system is to administer “stress tests”—a well-designed analytical process that has, for decades, been used by the IMF, World Bank and financial supervisors for detailed scenario planning to prevent future financial crises. (more…)

Chart of the WeekWaste Woes in the World

2020-01-31T10:38:50-05:00January 31, 2020|

By IMFBlog

Have you thought about how much garbage you generate every day? Economists have looked at the data and it turns out that higher-income countries like the United States, Denmark, and New Zealand generate at least twice as much waste per capita than developing countries. (more…)

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